Form-of-the-week: Buyer’s Listing Agreement – Specific Property Acquisition – Form 103-1
Most real estate transactions involving a buyer’s agent includes a commitment of the agent’s time locating qualifying properties for the buyer. However, the buyer’s agent generally bypasses this initial step of locating a property when:
- he represents a buyer at a real estate auction;
- the buyer has already located a property to purchase independent of the agent; or
- the buyer and agent have already located a property of interest and no written employment agreement assuring a fee exists. [See first tuesday Form 103]
When a specific property has been selected by the buyer, the agent needs to enter into a written single property fee agreement with their buyer known as a Buyer’s Listing Agreement – Specific Property Acquisition. The agreement safeguards the time spent on behalf of the buyer by assuring collection of a fee if the buyer acquires the property. [See first tuesday Form 103-1]
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Brokerage Reminder: A buyer’s retainer agreement – the written fee guarantee
When the agent’s duties do not require the need to locate a suitable property, the specific property agreement lists the particular tasks the agent is to do to receive their fee, such as:
- evaluating the economic suitability of the transaction;
- attending an open house with the buyer prior to auction and inspecting the property;
- obtaining and analyzing a title profile on the property;
- examining pest control reports;
- obtaining plat maps of the area surrounding the property;
- checking the property’s proximity to schools, markets, financial institutions, etc.; and
- developing an opinion of the property’s fair market value (FMV). [See first tuesday Form 103-1 §3.1]
If the buyer has already identified a suitable property, either prior to or after working with an agent, the prudent buyer’s agent enters into a single property fee agreement with the buyer as soon as possible. With the writing in hand, the agent holds an enforceable fee arrangement with the buyer, formally employing the agent and assuring payment of a fee if the buyer acquires the property, whether it is the buyer or the seller who is to pay the fee. [L. Byron Culver & Associates v. Jaoudi Industrial & Trading Corporation (1991) 1 CA4th 300]
Use of the single property fee agreement is particularly critical in a real estate auction situation. At an auction, a buyer’s agent has absolutely no assurance their buyer will be the highest bidder. Thus, a buyer’s agent under a regular buyer’s listing agreement calling for a fee to be paid on the buyer’s acquisition of the property runs the risk of receiving no compensation for their time, effort and talent performing due diligence investigations and assisting in the bidding.
When the buyer does acquire the property as the highest bidder, the single property fee arrangement is structured as a percentage of the price paid, such as 3%, or a fixed dollar amount, to be paid by the buyer. [See first tuesday Form 103-1 §5.1]
However, when the buyer is not the winning bidder, the buyer’s agent is still paid a fee. The fee under the single property agreement calls for compensation based on an hourly wage for the agent’s time spent investigating and assisting the buyer prior to completion of the auction. The agent can stipulate a flat fee be paid for their services rendered. [See first tuesday Form 103-1 §5.3(a), (b)]
